Sunday, January 30, 2022

Bread and Circuses

 Bread and Circuses


Few organizations have a license to print money, the NFL is one of those organizations. It also owns at least one day of the week for ~6 months (September-February), and increasingly some Mondays and Thursdays as well. The 32 teams that collectively make up the "trade association," yes they were actually considered a "non-profit" up until 2015. This former non-profit will generated some $9.8 Billion in revenue, coming to about $309 million per team. The growth over the past 10 years has been impressive.



Those are at least the numbers we can gleam from working backwards on data provided by the league's only publicly traded team, the Green Bay Packers. This wellspring of cash is undoubtedly much, much higher as "off-balance sheet" revenue from marketing deals is most likely a multiple of the actual reported TV revenue numbers. The bottom line is that there are probably only 3 people in the country who know exactly how much the NFL is really generating.  And amongst the treasurer, secretary, and commissioner of the NFL, the Commissioner reigns supreme.

Using a typical software multiple of 35, and assuming the true revenue is probably on the order of $50 to $100 billion, the NFL would rank as one of the most valuable companies in the world, on par with Apple or Microsoft or Google or Facebook or Tesla. It definitely has that level of sway in the corporate world as sponsors fight over placement in the never-ending cavalcade of commercial during a typical game.

Where do Americans learn about new cars? Football games. Where do Americans learn who has the best 5G coverage? Football games. Where do Americans learn how to gamble? Football games. This list is long and the influence is strong; if it is advertised during an NFL game there WILL be an ROI on the product or service. Indeed, some of the most iconic ads of all time have been placed during the Super Bowl.

Last year's Super Bowl average ad cost $6,000,000 for 30 seconds, generating nearly HALF A BILLION in single game ad sales alone. But really, what price is too much for marketing immortality? Consider arguably the BEST Super Bowl ad of all time, which is a bold statement, but this ad appeared only once. And it changed the world: 


So maybe changing the world is a good thing, but the flip side of the coin is that the NFL in many ways HAS become 1984 dictating societal norms without ever defining why, pandering to powerful unelected mobs with nefarious goals, and oligarchs siphoning away dollar after dollar of income off the masses. This makes the NFL in many ways the "Circus" of the proverbial "Bread & Circuses" popularized in ancient Rome for keeping the populace in line. Are we much different today?







Friday, January 28, 2022

Why Education Matters

 Why Education Matters


Education matters because it lets you refill the coffers in life when you have a bad week, month, or even year. Second chances abound with education. It is the proverbial "reset" button in life, a gift that keeps on giving. Education is one of the few things in life almost certain to improve your standing with increased income, mobility, health, safety, and security.

I'm sure we've all seen the charts of the value of a high school degree versus college degree versus a graduate degree (if not, see below.) But rather than the broad term of "education," what we should really be expressing is "specialization" or "skill," because trades which don't necessarily require college degrees, pay extremely well, and are all almost immune to outsourcing. Trades provide ample opportunity for advancement over time. For a really interesting perspective on work check out the Mike Rowe foundation.

America is great because of the opportunities offered to its citizens via hundred of years of building infrastructure, and a BIG part of that infrastructure is the "opportunity zone" available to people who WANT to learn, work, and earn. Readers of this blog who have traveled in less-developed parts of the world will agree with the above instantly, and also recognize why millions of people flock to this country every year. America's opportunity zone is unparalleled. 

So some of the best advice ILAF will ever give is this: focus on your education, and in particular honing a skill you can either sell or build a business around...and ideally live in a democratic republic where the rule of law prevails. Your education can be utilized to its full potential and rewarded accordingly.







Thursday, January 27, 2022

Getting Breyer'd

 Getting Breyer'd


The Biden Administration added another term to the popular lexicon yesterday when they leaked Justice Stephen Breyer's intention to retire to the media PRIOR to his actual announcement that he was indeed retiring, thus a Supreme Court Justice was effectively FIRED before he RETIRED. He was Breyer'd.

It is troubling in a Democracy that an elderly sitting Justice can be pushed aside with little recourse. Where was the President last night either apologizing or denying what happened? And to add further insult to the "retirement," Biden then vowed to break Federal Law by announcing both the RACE and GENDER of the new appointee...no need to discuss qualifications for sitting on the bench of the highest court fellow Americans, those are just needless distractions.

Politics determine policy and policy determine economic outcomes. Financial farmers should pay very close attention to the vetting "process" of highly appointed administration officials, bureaucrats, and judges as they will have significant impact on the future of this country's destiny. Gaffes add up, and lifetime appointments sometimes last a lifetime.




Wednesday, January 26, 2022

Fed Watch

 Fed Watch


With all eyes on the Federal Reserve today anxiously awaiting their decision on interest rates, aptly earning the Wall Street moniker "Fed Watch," it begs the question: Who watches the Fed?

Created in 1913 in response to multiple previous financial crises, the Federal Reserve is the ultimate central-banking system that wields God-like power over the global economy. Nearly everything humanity touches is directly impacted by the Fed's monetary policy. Their power is so vast that when a central banker sneezes, the world catches a virus.

The primary tool the Fed utilizes in projecting their monetary hegemony is the "Federal Funds Rate," colloquially termed the "interest rate." For some bizarre reason, they have complete control over this critical variable which directly impacts the reserve currency of the world, ie the U.S. Dollar.

If this all sounds a little complicated, it isn't. They Federal Reserve was given the mandate by Congress to maximize employment, stabilize prices, moderate long-term interest rates. It is by this final mandate that the Fed controls near-absolute power in the financial markets because the Fed Funds rate is directly tied to the 10-year treasury, which is the basis for nearly all mortgage lending in the United States.

The Rothschilds learned long ago if you can control the debt of a nation, you can control the nation. Hence is the case with the Federal Reserve. A body of unelected bureaucrats decide how much you pay for your mortgage, your car payment, your student loan, your credit card, and what the banks pay you for lending them money. And money? Even money itself is a powerful lever the Fed can pull in concert with the Treasury to increase liquidity, tighten supply, or tweak however they feel will most effectively accomplish their policy.

But what is their policy? Fed policy is loosely a reflection of the sitting Administration...they implement the financial whims of the sitting political party to a certain extent. If the current Administration wants to inject the economy with some growth, the Fed cuts rates, buys bonds (which adds liquidity), and generally maintains a loose monetary policy. In the event of rampant inflation (which steals buying power), the Fed is tasked with "controlling" prices, which typically implies RAISING rates to combat the effects of easy money.

We find ourselves in an easy money world now. The value of most things has remained the same (or even decreased, if you look at the "value" of a 4-year college degree for example), but their prices have skyrocketed. This is a serious problem when wages don't "keep up." Take one look around, from fuel to housing to education to healthcare (assuming one pays for it) to grocery bills, etc. The list is long.

Over time one of the greatest inflationary results has been the growth of the Fed itself. Its size and role has been on an unending creep up over the past century. To boomerang back to the top central question, who watches the Fed? Nobody really, just the entire world...but few enter the halls of this true Caesar.




Tuesday, January 25, 2022

Killing Them Softly

 Killing Them Softly


Executive Order 6102 signed by FDR made U.S. Citizen ownership of gold illegal in 1933. This act of tyranny went unchallenged for almost as long as his cousin Teddy Roosevelt's statue stood in front of the American Museum of Natural History. The two men could not have been more diametrically opposite in their policies, yet they were both men of their times. Sadly, it seems like we're reliving the early 20th Century all over again, both politically and socially with a pandemic which follows the Spanish Flu almost cough for cough,  an exit (entry?) into global conflict, and socialism rearing its Medusa head.

Change the dates and change the names and the resemblance is uncanny. Word War I raged in the midst of the Spanish Flu, and the "war to end all wars" finally ended on November 11th, 1918. The Spanish Flu swept around the world from February 1918 until April 1920 (give or take some months, of both sides of that figure.) The mortality rate of the two accounted for some 70 million deaths, of a population of 1.9 billion. Equivalent deaths today would be on the order of 300,000,000. That is a staggering figure. But what happened next in the early 1920s and what is happening today should scare the bejesus out of you.

When there is a vacuum in power, wealth, influence, leadership, ability, morality, etc., etc. it is usually quickly filled; indeed the adage "nature abhors a vacuum" is poignant and precise. Who or what fills that vacuum now is troubling for both financial farmers and more so to the citizens of this country. Just like Executive Order 6102, which made owning God's money, gold, illegal we are seeing a game plan right out of 1933.

If a government wants to fundamentally change the fabric of a society, it kills them softly. A two-pronged approach of utilizing acts of omission and commission works best. The players are on the field and the game has begun, with the first salvo being the most destructive, which of course is an act of omission. Getting something done in Washington is actually pretty hard, even if you are the ruling party. You often don't have the majority and then there is the pesky voting to worry about...but acts of omission? Oh boy, such opportunity!

National sovereignty is probably the most binary political issue there is...either a country has sovereignty or it doesn't, and all natural law flows from that fact. If a country does not have sovereignty, then it is not a nation by definition. It is a group of people who live in a certain geography. There is no border, there is no law inside that border, and there is no enforcement of said law(s). There is no shared value system, there is no language, there is no culture, there is simply of place residence. 

So if you want to dilute or negate the rights of citizens presumably in a nation, you simply ignore the presumption of a nation with borders. That's an easy act of omission that has a massive impact and can be accomplished by doing nothing, yet advances your political goals immensely. But that's just one variable to the final solution of a central government. 

The two other pieces to the "triumvirate" are Regulation and Taxation. Those two can pretty much steer a country to prosperity and freedom or doom and tyranny; although some voting might be involved by elected "representatives," a LOT of damage can be done with a regime fixated on changing the fabric of society via executive order.

Consider, FDR essentially made illegal a basic human right of the pursuit of happiness by outlawing gold as a store of value. This ring especially true today, where the first item on the IRS Form 1040 is a question about "crypto." Another way to regulate freedom is to require disclosure of something, and naturally then to tax it. And was we well know, the more you tax something the less of it you get. Let me say that again; the more you tax something, the less you get.

So less energy production, fewer side hustles, less crypto, less innovation, etc. etc. Ad nauseam. The end result of these polices inevitably less freedom for citizens and more control by the central government. Side effects naturally are the breakdown of society; more crime, more corruption, less enforcement, less good medical care, less good education, less good services in general.

When everything is free, nothing has value. Socialism's grip is tight. It provides government with tremendous control over its population. Just take a look at Australia and New Zealand, which have become de facto police states controlled by bureaucrats who have thoroughly embraced the strategy of "Killing Them Softly."

 

Friday, January 21, 2022

Mean Reversion

 Mean Reversion

Jeremy Grantham believes we are in the fourth superbubble of the last hundred years. He has many valid points and raises the specter of an utterly dismal 2022. Already we are down the first 3 weeks of January, and history shows that with almost certainty a down January results in a down year (.732 batting average.) With a handful of exceptions, notably massive Federal Reserve bailouts, this has always been the case. Grantham, however, takes it one step further than rule-of-thumb Wall Street adages and formulates a thesis on the simple premise of mean reversion.

Mean reversion describes just what it implies; that there will be a return to the average growth rate over time. Yes the growth rate itself might change over time, but sustainment of extremely high deviations from this average are difficult, if not impossible, to maintain over longer and longer periods of time. Typically they come in "bursts" that spike up (or down) in sharp, unstained points. Consider one of the best baseball batters in history, Ted Williams.

With a lifetime batting average of .344, Williams is arguably the best batter of all-time. He finished his career as the last batter with OVER a .400 average...that was almost a 20% deviation from his mean. Over long-enough careers with enough data players can be predictable, hence the rise of the current "Moneyball" climate of assembling a team on pure statistics. The stock market has even more statistics and a greater database to glean from for investors than baseball.

Consider the chart below, which identified 3 of the last 4 superbubbles and makes a prediction for the current situation: 


According to Grantham we're overdue for the next "blow off" from the housing, commodity, bond, and equity volcanic peaks. He even has a nice quick-reference rule set to follow:


The only caveat keeping the markets going, according to Grantham, is the paradigm shift we've allowed ourselves to believe in regards to markets (all of them) never falling and always going up. No matter what. Now almost all reasonable financial farmers know that this cannot be; we look outside the window and see the weather change by the minute and so it is with the economy as well.

There is no doubt that Wall Street has been shedding risk like a snake molting skin. Case in point is the complete liquidation of stocks without an "E" in the P/E ratio...take a look at symbol ARKK for example, which is Cathie Wood's Ark Innovation ETF. That portfolio is composed almost exclusively of higher growth, lower (no) earnings companies. It has been dealt a severe blow in the past 6 months, and increasingly in the last month, as investors dump the speculative sector and plow right into the blue chips.

Grantham believe that this too will not matter when the reckoning comes because there will be an epic blow off taking down multiple markets simultaneously. It might be time for investors still riding high from recent valuations surges to round up some cash. Assets (things that pay YOU to own THEM) always seem to be in vogue, regardless of market conditions. But speculative "assets" without adequate reserves or more importantly paying customers might be in serious trouble. 

The big winners in history when bubbles pop are those with little to no debt, and an abundance of liquid cash. They have the ability to buy on the cheap when there is blood in the streets. Prices are high. Inflation is high. BUT high(er) paying jobs are still plentiful. If that final paradigm shifts, watch out below.










Thursday, January 20, 2022

Crimea 2.0

 Crimea 2.0


Eight short years ago we were just wrapping up the Winter Olympics when Russia invaded Ukraine and seized the Crimea. President Obama did nothing. The milquetoast response of "sanctions" were roundly brushed off by the Russians. The situation in the Ukraine today feels like Crimea 2.0. Does the European Union, NATO, or the United States have the backbone to prevent war? Probably not.

Investors ignore situations like this at their own peril; students of history are well aware of how the Balkans helped launch World War I with the assassination of Archduke Ferdinand. This catalyst caused a domino effect nearly 100 years ago. It isn't a far conjecture to see the chess board set-up quickly in 2022 as an early decisive move seems eminent. Frankly, it baffles the mind of this Western pro-democracy supporter of how the entirety of Western Europe and the United States is yet caught on their heels yet again as a Russian Military force effectively dictates the battlespace.

The most likely result will be further solidification of Ukrainian sovereign land into the Russian Federation. If recent history is any indicator, neither the rhetoric or economic sanctions proposed by Western Europe or the United States will have any stopping power. The Ukraine may in its entirety fall under Russian control. There is a strong possibility given the spineless response from the West that Ukraine could even be taken without a shot. Why? Simply put, Western Europe needs Russia more than Russia needs Western Europe; Russia supplies over a third of all power to Western Europe in the form of its natural gas and oil pipelines. This does not bode well for Ukraine.

Obviously this possible invasion is a serious problem for democracy in Ukraine, but it also further establishes a terrible precedent of a U.S. and Western Europe malaise and unpreparedness. Neither are good traits agains a Russia that is clearly capable of immediate action. Investors take note; the Russian Federation is proudly wearing their laurels as we sit on ours. Besides the clear violation of Ukrainian sovereignty, the very real possibility of further unimpeded annexation exists, all the while the West conducts meetings on what to do that should have occurred years ago.

Raising some cash here probably isn't a bad idea, and it is hard to believe that both the energy and gold markets won't express their concerns. Natural gas in particular looks like it is held in the crosshairs.  Watch this situation closely, obscure maneuvers in far-off lands often ultimately have dire global results. Putin knows he's playing chess with a pigeon, and Xi will feel emboldened to take Taiwan after the Olympics this year as his "Gold Medal" on the world stage if the West does nothing (again) in Ukraine.






Wednesday, January 19, 2022

Branding Power

 Branding Power


There is no better adversary to inflation than a strong brand. Branding power allows a company, typically consumer-facing, to INCREASE their prices or "pass-along" underlying inflationary costs for their raw materials on to the end user. But this cost transfer is a little misleading. And something we as financial farmers should pay closer attention to.

Consider the lowly pound of coffee. Typically sourced from arabica beans in a mostly equatorial geography, a pound of coffee "arrives" here in the United States via a circuitous path from grower to harvester to roaster to grinder to your morning cup of Joe. Now the headline inflation number we might see for a pound of coffee might be 10% for example. Consumers just assume by constant media barrages that they will be paying headline rate increases. And they're right, kinda.

That 10% increase on a pound of coffee might translate to a whole price increase of $0.30 cents on the pound for a large, vertically integrated coffee company. That company can "cut" a pound of coffee into approximately 30 cups and sell each for a retail price of $5. But with "inflationary pressure" the NEW price is $5.50...a "10% increase." 

Quick math here reveals something quite different. That $0.30 increase at the wholesale level is a boon at the retail level, allowing the coffee retailer to rake in another $15 per pound. Assuming the brand is strong enough, and product good enough, an investment of $0.30 yields a an amazing 50X return for the retailer! 

We used coffee as an example, which is one of the most lucrative businesses in the world, but the same concept applies to nearly every other consumer-facing brand. Wholesale price increases "give permission" to the company to increase prices on the consumer. One could even argue that inflation to retail-facing companies is a flywheel which ignites further, compounded profits. Consumers are hard-pressed to find FALLING prices once an inflationary spiker recedes. Higher prices are sticky...and honey to the owners of these brands!


Thursday, January 13, 2022

The Great Resignation

 The Great Resignation


A by-product of the pandemic has been a spike in the "quits rate," the rate at which people quit their jobs, to an all-time high of 3%+. Now a measly 3% doesn't sound like much from a percentage standpoint, but when you factor in natural retirement, loss of workers, and a huge number of job openings we have a problem Washington.

Keep in mind 3% is the AVERAGE, meaning even with the explosive growth in certain sectors, quitting has become the norm in many fields, like tech and healthcare, which had rates significantly higher than the average. One of the best, if not THE best, piece I've seen studying this phenomenon was published recently in the Harvard Business Review. Yes Harvard is smart. Yes the article was superb, but it never really delved into WHY people are quitting. Worry not fellow financial farmer, ILAF is here with our "curriculum vitae" to help you decipher this trend.

Why does someone work? Generally the answer to that question is "to make money." If we strip out the other common reason "for the benefits," ie healthcare, then almost exclusively people work for money, especially if the state provides either free or significantly subsidized healthcare. I would say the REASON people work for money is to support themselves, their family, AND they REALLY have to work if there are debts like education, housing, and living expenses to pay. To totally generalize from the top two categories of those fueling the Great Resignation, tech and healthcare, I believe that there is a HUGE dichotomy in terms of WHY.

The curve to enter healthcare is relatively steep; there are years of education, training, and commitment to become a nurse, doctor, EMT, provider, etc., etc. Their quits rate would almost certainly have to come from burnout and exhaustion rather than choice, especially if there was significant debt overhang. This quits rate is more aptly termed a capitulation rate. This "cap rate" is a function of Maslow's Hierarchy of Needs, where literally survival trumps employment. Sadly, these professionals are also "being quitted" by mandates. It is a double-edged sword. The flip side of this quits rate in tech, however, is very different.

The tech industry has a much different dynamic occurring. Although the barriers to entry are arguably on par with the medical world in terms of education and skill, the REGULATORY environment is quite different. Generally speaking, in the tech world you are judged, hired, fired, retained, promoted, etc. on your ability to code, create, market, etc. There is an entire regulatory ecosystem MISSING from the tech industry that has allowed it to flourish. Which brings me to the quits rate for tech.

The tech quits rate is on par with the healthcare industry, but for vasty different reasons. The WHY, especially for the core quitters in the 30-45 age band is pretty simple. They don't necessarily HAVE to work. Through a confluence of events many of the tech quitters do not have high debts, nor onerous regulatory requirements to keep current to keep employed. Most own or owned some portion of a company that has gone UP in value. So debt free or low debt with a stash of cash and manageable healthcare costs make leaving work out of CHOICE for tech easy.

What does this quits rate dichotomy mean? I don't see healthcare DEMAND easing, so either more less qualified employees will be hired or pay will have to be raised for existing providers to remain or both. I bet on BOTH. The demand is simply too great to shoulder on the existing model, especially with various mandates being imposed on healthcare in general. So as a cost of our GDP healthcare will take an increasingly high bite, regulations will increase, and the misery index of working in healthcare will also increase. When the ratio of administrators to doctors begins to fall we will be on the right track.

On the tech front, billions of dollars are flowing into PE Funds (private equity) and the majority of that is flowing into tech companies. The great winnowing is always happening, where the best and most successful companies gain the lion's share of a disruptive market, whether it be food delivery, social networking, or EV engineering. Many will fail. Billions will be spent and lost. But from that wreckage a handful of truly exception winners will emerge....and in tech, quitting while you're ahead isn't the same as quitting.

Wednesday, January 12, 2022

Poopmetrics

 Poopmetrics


If the politicians can't be trusted, then what can citizens rely upon to tell them the Covid truth? Why fecal matter of course! Aptly titled "Poopmetrics" this article deals with the increasingly useful, accurate, and utility of measuring fecal matter in wastewater as both a snapshot AND predictive model of the NIH-funded gain-of-function research that lead to the release of Covid-19 from the Wuhan Institute of Virology in 2019.

This raw data gleaned from sewerage is probably one of, if not THE signature scientific advancement, outside the vaccines and therapeutics we have made since the start of the pandemic. It is scientifically sound. It is available at scale. And unless the politicians can corrupt the data flow, it should remain an enduring metric of the current infection pool, its delta (meaning change, in the classical Greek reference), and projected impact across geography in the United States. Obviously it is also scalable from a global perspective. Smoking Gun Alert: Is there a Wuhan dataset available from June 2019-December 2019?

Fecal analysis is about a pure a statistic as inflation and taxation in terms of portability to utility in terms of baseline establishment and predictive value. We can shift resources. Implement different treatments. And hopefully save lives!

From a financial perspective this collapse we see in Omicron in Boston sewerage after a hyper spike is extremely bullish; is this the third and final wave of Covid-19 that will then dissipate into the Spring? That chart sure looks good. Also encouraging is the relatively LOWER negative outcomes as a percentage of infections and hospitalizations. With over 75% of the population vaccinated and with a large percentage of the total population already exposed, recovering, or recovered from having had Covid-19 it seems that we are finally turning the corner on a pandemic which has raged for nearly 3 years.

Takeaways? In life and investing, look for raw, unadulterated visual data. We are a visual species. Politicians lie, but visual data accurately displayed tells its own story without spin. Stack these visual data sources and generate your own conclusion based on facts, reason, and probability. Then make your move.

Tuesday, January 11, 2022

ARKK Barometer

 ARKK Barometer


Cathie Wood's ARK Innovation ETF (ARKK) acts as an excellent barometer for investor sentiment. Almost halved in a year, while the Dow spiked to over 35,000, ARKK visually displays the change in investor philosophy and risk appetite. 

A disciple of Arthur Laffer, Wood started her investment firm with the underlying thesis of disruptive innovation underpinning her investment goals, namely that disruptive companies create new markets and value networks. These companies hope to displace established market leaders aka entrenched monopolies.

In essence Wood is betting on a future of new technology that would improve humanity with better efficiency, because as a rule monopolies become less efficient and innovative as they mature into complete control of a market.

So why has Cathie's fund be cut in half? Rather than a collapse in the underlying technology, I believe there has been a 180 degree change in investor sentiment that believes reward (or gain) will come from "established" (read monopolies) that have existing market share, customers, and the big "E" in the P/E ratio...EARNINGS.

Mathematically, investors are betting on "business as usual" rather than innovation. Why? Because they are receiving signals that entrenchment wields the power and will be rewarded. Why? Because those are the signals being sent by Washington. How? Increased taxation. Increased regulation. Increased inflation. Increased enforcement. Decreased autonomy. Decreased workforce flexibility. Decreased worker qualifications. Those are a handful of the signals flashing. Investors have taken note.

Contrary to popular belief, Wall Street isn't dumb. Money flows where it is welcome and makes a return. Typically it chases winners. Just take a look at net new flows of money. It almost always flows into funds that have most recently performed well. And flees poorly performing funds. It seeks to survive and grow by chasing returns. The most successful funds of 2021 were the tech monopolies and natural resource monopolies. Small innovation got utterly crushed.

My final thought on this subject is that immutable laws are hard to break. They can be avoided. They can be postponed. But ultimately there is a reckoning. Although policy and regimes may put their weight behind the status quo, ie monopolies, the proverbial sidewalk flower will grow in a concrete jungle. 


Monday, January 10, 2022

Bad Omens

 Bad Omens



Although the old Wall Street quip is to never believe that "past results are indicative of future performance," my Stock Trader's Almanac 2022 (similar to the Farmer's Almanac, but specifically devoted to the stock market) is flashing some serious warning signs.

Consider: "Every down January on the S&P since 1950, without exception, preceded a new or extended bear market, flat market, or a 10% correction." We are definitely NOT doing well out of the gate in '22.

Also: "...the second year of new Democrat presidents have been down -2.3% on average."

Finally there are *kinda* a couple other concerns: 1) A raging Covid variant named Omicron which is sweeping across the world at hyperbolic infection rates. 2) Inflation that is almost off the charts (we have to go back to the  late 1970s/ early1980s for similar data points during the Jimmy Carter Administration.) 3) Mid-term elections which promises to be every bit as cantankerous at the last Presidential Election.

What is an investor to do? Head for the hills and bunker down? Withdraw cash from your own savings accounts in amounts less than $10K so the government doesn't put you on a suspected money lauder list? Buy more toilet paper? No I say! Rather consider the following course of action: Remain employed if possible and continue to purchase assets (things that pay you to own them) and keep physically fit.

The stock market, and the entire world for that matter, has almost universally survived and prospered on the back of growth...meaning the survival of individuals and companies via increased earnings in one form or another. A large part of this growth over the past 50 years has been due to the integrated circuit. That has spawned the technology to vastly improve the lives of billions.

The "Age of Silicon" is not over by a long-shot, as growth in medicine, manufacturing, engineering, teaching, and yes even Wall Street is underpinned by the ability to increase speed, accuracy, and quality while at the same time lowering cost and barriers to entry.

So although there are multiple bad omens on the horizon, keep faith with the prospect of a better tomorrow...whether that is next week, next month, or next year. High volatility in Covid, the markets, and even politics does not last. Hopefully all three will moderate in the coming months. Until then, as financial farmer focus on accumulating assets, increasing your cash flow, and keeping physically fit. Life is a marathon.



Sunday, January 9, 2022

Omicron Surge

 Omicron Surge


The recent Omicron Surge is eerily similar to the Volatility Index in the U.S. Stock Market, so similar in fact this author is willing to step out on a limb and predict that just like sustained high volatility, sustained Omicron is nearly impossible. What does this mean dear readers? The end is near for the pandemic.


How do I have the gaul, the IQ, the "je ne sais quois" to make such a bold statement when the likes of Anthony Fauci, the CDC, NIH, USA Govt leadership, not to mention the entire (mostly) media establishment has not broached the subject? Math my fellow financial farmers!

Extreme volatility is similar to extreme spikes in almost every natural event; it takes extreme energy to maintain extreme deviations from the mean. And nature abhors sustained deviations from the mean. Let me say that again just for good measure: Nature abhors sustained deviations from the mean.

With the Omicron variant now surging to over 1,000,000 (1M) case per day, the White House narrative has changed dramatically over the past several weeks from "We will defeat the virus!" to "Contain the virus!" to "Embrace the virus!" Immutable natural laws are impossible to defeat.

History, I believe, will show that the vaccines acted as a significant and worthy speed bump which prevented millions of deaths, but probably more importantly, bought us time as a nation, as a species, to be overcome by a third wave of intense infectiousness and lower lethality. Reversion to the mean is my expected result.